Blue Cross: HEALTH INSURANCE
Erwin A. Blackstone and Joseph P. Fuhr
Blue Cross began in the depths of the Great Depression as a device to try to maintain the financial solvency of the nation's voluntary hospitals. It rapidly rose to dominance in the provision of hospital insurance. Blue Cross maintained that position for many years. Eventually a number of factors led to its loss of dominance. However, Blue Cross still remains a major provider of health insurance.
In the 1920s, the period immediately before the Great Depression, hospital capacity increased as a result of philanthropic giving. For example, between 1921 and 1931 hospital capacity as measured by beds grew by 55 percent.1The rise in capacity created a concomitant rise in operating costs which had to be covered by patient charges or charitable contributions. The higher charges resulted in a decline in occupancy by the end of the 1920s. For example, occupancy rates at New York City voluntary (non-profit but not public) hospitals declined to 50 percent in 1928.
The Great Depression hit hospitals hard. Occupancy declined from an average rate of 71 percent in 1929 to 64 percent in 1930.2Over the same period revenues per patient declined from $236.12 to $59.26. Even before the Great Depression, Americans faced great difficulty in paying for anything but a very short hospital stay. There was essentially no hospital insurance. The president of the American Hospital Association (AHA) stated that the organization's basic goal was to provide "hospitalization for the great bulk of people of moderate means . . .